Odds of an interest rate hike from Bank of Canada this year have jumped
OTTAWA — Traders are increasingly betting that the Bank of Canada could end its string of interest rate holds and deliver a hike as early as next month.
Traders are growing confident that the Bank of Canada could lift interest rates as soon as next month, despite many economists doubting a hike this year. The central bank has maintained its policy rate at 2.25 per cent for nearly a year, waiting to see how the economy and inflation respond to recent shocks. With just over a month until its next meeting on Oct.
28, market odds have shifted to nearly even for a rate hike, according to LSEG Data & Analytics. The shift is attributed to persistently high global energy prices driven by the Iran conflict, which has kept oil costs elevated. While some signs of this impact are still limited, the central bank's governing council acknowledged the risk to inflation, noting that the longer oil prices stay high, the greater the threat.
Rising global bond yields, partly due to concerns over U.S. sovereign debt, have also contributed to the odds favoring a possible October rate hike. If market expectations turn to hikes, bond yields will rise, providing some relief by making borrowing more expensive for Canadians, easing some pressure on the central bank to increase rates.
Both economists expect the Bank of Canada to remain patient for the remainder of the year, with a potential rate hike in the first quarter of 2027.
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